On 1 July 2021 Lucas Ltd grants 100 options to each of its 40 employees conditional on the employee remaining in service over the next three years. The fair value of each option is estimated to be $12. Lucas also estimates that 10 employees will leave over the three year vesting period. By 30 June 2022 four employees have left and the entity estimates that a further eight employees will leave over the next two years.
On 30 June 2022 Luca decided to reprice its share options, due to a fall in its share price over the last 12 months. At the date of repricing, Lucas estimates that the fair value of each original option is $3 and the fair value of each repriced option is $5.
During the year ended 30 June 2023 a further four employees left and Lucas estimates that another four employees will leave during the next year.
During the year ended 30 June 2024 only three employees left. The share options vested on 30 June 2024.
The remuneration expense for the year ended 30 June 2022 is:
A) $11 200
B) $12 000
C) $13 500
D) $14 000

Question

Quizplus · Accepted Answer

The remuneration expense for the year ended 30 June 2022 is calculated based on the fair value of the options and the estimated number of employees expected to remain. Initially, 40 employees were granted options, but 4 left, leaving 36. Lucas estimates 8 more will leave, so 28 employees are expected to remain. The expense for the year is calculated as (28 employees * 100 options * $12 fair value) / 3 years = $11,200.

On 1 July 2021 Lucas Ltd Grants 100 Options to Each